Stock Tips for July 31, 2007

So the question is this the start of recovery or a bounce?  We think a bounce with a re-test of lows.  No idea how far the bounce will go though.  There is no real way to know no matter who says they can. It seems that any bad news around real estate, sub-prime, M&A, CDO, LBO, you name it; sends the markets dropping fast.  The increased fear potential is definitely there.  Given that the financial bad news is certainly not complete, the potential for some big drops are still there.  In fact, it is more than potential, it will probably happen.  This is why we are waiting for new buys. Will this be as bad as the S&L crisis?  Probably not.  The bank crisis of 1990?  Nope.  Could it be, yes.  We do not have enough data to determine how deep rooted this is and how far it could impact the markets. It all depends on the 'ripple' effect.  If too many people default on their mortgages, after deliquencies, the impact could be widespread across financials.  Not only impacting earnings and leading to layoffs, it could then ripple to their other lines of business such as credit risk aversion which could create a reduction in debt based M&A.  This would then reduce liquidity in the marketplace driving the markets down as the sellers overwhelm the buyers.  Yep, back to Econ 101.  This is just 1 of many scenarios.  Too early to tell.  We are burning the midnight candles analyzing as much data as we can get our hands on.  Finally, we are considering hedge for stock tips scenarios, but we are not quite there yet.  An acceleration in any of the bad news in areas discussed above and we will be there.